Tag Archives: Executive Compensation

U.K. Government Announces Corporate Governance Reform Proposals

In the great pendulum swing that characterizes the mood toward government oversight of companies and corporate governance, the pendulum in the U.S. has swung against regulation and against mandated governance requirements. However, in the U.K., the pendulum is on the opposite end of the arc, as the current government is moving quickly to adopt new … Continue Reading

Carrot and Stick: Incentive Compensation and Compensation Clawbacks

One of the recurrent governance proposals to remedy corporate excesses has been the idea of clawing back the compensation paid to company officials who presided over corporate scandals. Both the Sarbanes Oxley Act and the Dodd-Frank Act included provisions mandating compensation clawbacks for corporate executives at companies that restate their financial statements. As Columbia Law … Continue Reading

Guest Post: Ninth Circuit Clarifies What Might Trigger SOX 304 Disgorgement

Among the many issues arising under the Sarbanes-Oxley Act are questions surrounding disgorgement under Section 304, particularly questions concerning what actions and whose actions might trigger disgorgement. In the following guest post, Bruce Ericson of the Pillsbury Winthrop Shaw Pittman law firm takes a look at the Ninth Circuit’s August 31, 2016 decision in U.S. … Continue Reading

Controversy Surrounds SEC’s New Proposed Dodd-Frank Executive Compensation Clawback Rules

On July 1, 2015, a divided SEC voted 3-2 to propose rules directing the securities exchanges to adopt standards requiring listed companies to adopt policies requiring the companies’ executive officers to pay back incentive-based compensation in the event the company restates its financials for the year in which the compensation was awarded. The proposed rules, … Continue Reading

Executive Compensation: Do Clawbacks Lead to Certain Types of Earnings Manipulation?

When Congress enacted stiff executive compensation clawbacks as part of the Dodd-Frank Act, the assumption was that the adoption of these kinds of measures would reduce the number of corporate restatements and increase investor confidence in financial reports. However, a new study focused on companies that have adopted clawback measures suggests that these gains may … Continue Reading

Are We Done With Executive Compensation Proxy Disclosure Litigation?

The onslaught of litigation filed after the advent three years ago of the Dodd-Frank “say on pay” requirements may finally be winding down. According to a June 23, 2014 memorandum from the Pillsbury law firm entitled “Is Proxy Disclosure Shareholder Litigation on Executive Compensation Finally Over?” (here), the litigation came in three distinctive waves. The … Continue Reading

Executive Compensation and Populist Discontent

Over the weekend, voters in Switzerland rejected by a roughly two-to-one margin a referendum that would have restricted executive salaries at Swiss companies to twelve times that of the company’s lowest paid employee. The vote outcome is interesting because it follows so closely on the heels of a ballot initiative  earlier this year in which … Continue Reading

Enough Said Yet?: Say on Pay Litigation May Have Had Its Day

As I have noted in prior posts (most recently here), plaintiffs’ lawyers have rushed to file “say on pay” lawsuits, either after a negative advisory shareholder vote on executive compensation, or more recently before the vote occurs based on alleged deficiencies in the proxy materials related to the vote. In the latest in a lengthening string … Continue Reading

The SEC’s Proposed Pay Ratio Disclosure Requirements: Another Fine Mess

Among the many measures Congress included when it enacted the sweeping Dodd-Frank Act in 2010 was a provision directing the SEC to require companies to disclose the ratio of CEO compensation to median employee compensation. The statutory provision, incorporated into Section 953(b) of the Act, reflected a perception that CEO compensation had gotten out of … Continue Reading

Now Up: The “Third Wave” of Executive Compensation Litigation

The first wave of “say on pay” litigation involved lawsuits brought by shareholders following a negative advisory say on pay vote under the Dodd-Frank Act. The second wave of say on pay litigation, which picked up in 2012, involved plaintiffs’ efforts to enjoin upcoming shareholder votes on compensation or employee share plans on the grounds … Continue Reading

“Say on Pay” and Executive Compensation Litigation: Plaintiffs’ New Racket

I am pleased to publish below a guest post from Bruce Vanyo, Richard Zelichov and Christina Costley of the Katten Muchin Rosenman law firm These three attorneys’ post addresses a new approach that plaintiffs’ lawyers are taking to “say on pay” challenges – that is, a preemptive attack in the form of a lawsuit seeking … Continue Reading

First the “Say on Pay,” Then the Lawsuit?

One of the many changes introduced by the Dodd-Frank Act was the requirement for a shareholder vote to approve executive compensation. Under the Act’s provisions, the vote is not binding on the company or its board, but is purely advisory. Nevertheless, companies whose shareholders vote against their “Say on Pay” resolutions are finding that lawsuits … Continue Reading

Do Comp Reform Proposals Threaten Increased Board Exposures?

One of the propositions on which most commentators seem to agree is that perverse compensation incentives helped fuel the global economic crisis. For example, last Wednesday, formed Fed Chairman Paul Volcker said in a speech that one of the causes of the financial crisis "was the ultimately explosive combination of compensation practices that provided enormous … Continue Reading

CEO Not Charged With Fraud But SEC Pursues Clawback Anyway

By the SEC’s own account, an enforcement action the SEC initiated on July 22, 2009 represents the first occasion on which it has used the Sarbanes-Oxley Act’s "clawback" provision to recover compensation from an individual not otherwise alleged to have violated the securities laws. While this type of action apparently was contemplated by the statute, … Continue Reading

Executive Compensation: The New Front Line in the Litigation Wars?

Litigation over executive compensation is nothing new. The long-running clash over Richard Grasso’s $187 million NYSE pay package is only one of many titanic legal battles compensation issues produced in the past. But executive compensation litigation recently seems to have entered a new phase, fueled by moral outrage.   Drawing on popular anger evidenced most … Continue Reading

Restatements, Clawbacks and CFO Career Consequences

If the facts don’t fit, you must remit. That seems to be the view of an increasing number of companies, as they have adopted provisions requiring repayment of executive compensation found to have been based on incorrect financial statements. The concept of compensation clawbacks was actually built into the Sarbanes Oxley Act. Section 304 requires … Continue Reading

The CEO’s “Pay Slice”, Corporate Governance, and Corporate Performance

One of the legacies from the era of the corporate scandals is the lasting image of certain corporate leaders as “imperial CEOs” (refer here) – that is, as greedy, power hungry overlords who exploited their companies to their own enrichment and to the shareholders’ detriment. Excessive CEO pay remains a widely perceived marker for poor corporate … Continue Reading

Check the CFO’s Pay Packet, Too

Commentators have long focused on CEO compensation as a leading corporate governance concern. Indeed, the Corporate Library has even suggested (here) that CEO compensation practices that “are poorly-aligned with shareholder interests” are “a powerful indicator of potential securities litigation.” While CEO compensation unquestionably is an important issue, academic research recently published by three Michigan State … Continue Reading